Professional Services

Consultants, engineers, architects, IT firms and other professionals in Pakistan face three recurring questions: how much tax their clients take from each invoice, whether they owe provincial sales tax, and how income from clients abroad is treated.

How money moves through a professional firm

The points where tax and accounting rules come into play are numbered.

Stage 1Win the clientEngagement proposed to a client here or abroad.
Stage 2Agree the scopeEngagement letter sets fees, scope and place of service.1
Stage 3Deliver and track timeWork done and hours recorded against each engagement.
Stage 4BillInvoices raised with provincial sales tax where due.2
Stage 5CollectFees received, some from abroad through banking channels.3
Stage 6Pay the team and ownersStaff salaries paid; partners take their share of profit.4

Numbered points are explained below.

The four points, explained

At: Agree the scope

Provincial sales tax on services

Sales tax on your services is owed to a province, and the wrong province means registering, invoicing and filing in the wrong place. Most professional and consultancy services are taxable under provincial law, with SRB, PRA, KPRA or BRA, and registration, invoicing and monthly returns follow the law of the province where the service is provided.

How we help

We check where each engagement is provided and handle registration and returns with the right authority.

At: Bill

Tax withheld from fees

Your clients take tax from each invoice, and whether you owe more at year end depends on how that tax is treated. When a prescribed person pays for services, section 153 requires income tax to be deducted, and whether it is final, minimum or adjustable depends on the type of service and the payee.

How we help

We match the withholding certificates from each client to your invoices and work out the balance in your return.

At: Collect

Clients abroad

Income from clients abroad can fall under a separate regime, but only if its conditions are met. Income from exporting services, including IT and IT-enabled services, can be taxed under a separate regime where the proceeds come through banking channels, and the rules and conditions change often.

How we help

We check the conditions each year and keep the remittance evidence the regime depends on.

At: Pay the team and owners

AOPs and partnerships

In a partnership, tax is dealt with twice: once for the firm and once for each partner. Many professional firms are associations of persons; the AOP files its own return, and the partners’ share of profit has its own treatment in their personal returns.

How we help

We prepare the AOP return and check that the partners’ returns treat their share consistently.

Services that apply

All services

Tax Returns & Planning
Returns must reconcile the tax withheld by each client and the regime your income falls under.
Cross-Border Tax
Clients abroad raise questions on export regimes, treaties and remittance evidence.
Bookkeeping & Accounting
Invoice-level records keep income tax withholding and provincial sales tax aligned.
Company Setup
Professionals moving from sole practice to a company need SECP and tax registrations.

Questions

Still have a question?

My client deducted tax. Do I still pay more at year end?

It depends on whether the deduction is final, minimum or adjustable for your service. We calculate the balance, if any, in your return.

Do I charge provincial sales tax to a client in another province?

The province where the service is provided usually decides. Rules differ between SRB, PRA, KPRA and BRA, so we check each engagement.